Fertilization via nutrient deposition and agricultural inputs is one of the most important factors driving decreases in plant diversity. However, we still do not fully understand which processes (niche process or neutral process) are more important in leading to decreases in plant diversity caused by fertilization. A hypothesis-based approach was used to test the relative importance of niche versus neutral processes along a fertilization gradient in an alpine meadow community on the eastern Tibetan plateau, China. Niche overlap values were calculated for species biomass, and the null model was used to generate the values of niche overlap expected at random. A linear regression modeling was used to evaluate the relationship between functional traits (specific leaf area, leaf dry matter content, and leaf total nitrogen concentration) and species relative abundance. Our results demonstrated that observed niche overlap for species biomass was significantly higher than expected at lower fertilization gradients. Moreover, we also found a significantly negative correlation between species relative abundance and specific leaf area and leaf dry matter content, but a significantly positive correlation between relative abundance and leaf nitrogen concentration at lower fertilization gradients. However, these relationships were not significant at higher fertilization gradients. We concluded that community assembly is dynamic progression along the environmental gradients, and niche and neutral processes may together determine species diversity loss in response to fertilization.